End-Aug. outstanding debt dips to PHP 15.5T

The national government’s (NG) outstanding debt slipped to PHP 15.55 trillion as of end-August due to a stronger peso and the net repayment of foreign debt, the Bureau of the Treasury (BTr) said.

Data from the BTr showed that the NG’s debt portfolio fell by 0.9% month on month from the record-high PHP 15.69 trillion as of end-July.

This marked the first decline in the government’s debt stock since end-March, when the debt dropped by 1.67% to PHP 14.93 trillion.

“This decline was primarily attributed to the revaluation effect of peso appreciation and the net repayment of external debt,” the Treasury bureau said in a statement.

Year on year, outstanding debt increased by 8.4% from PHP 14.35 trillion at the end of August 2023.

Of the total debt, 69.4% was from domestic sources, while 30.6% was from external sources.

Domestic debt inched up by 0.4% to PHP 10.79 trillion as of end-August from PHP 10.75 trillion in the previous month. Government securities accounted for nearly all of domestic debt.

“The increase stemmed from the net issuance of government securities amounting to PHP 45.05 billion, albeit partially offset by the PHP 6.59-billion downward revaluation effect of the peso appreciation on US-dollar-denominated domestic securities,” BTr said.

The peso strengthened by PHP 2.31 to PHP 56.18 a dollar at end-August from its PHP 58.49 finish at end-July.

On the other hand, foreign debt fell by 3.6% to PHP 4.76 trillion at end-August, from PHP 4.94 trillion a month earlier.

“The decline was brought about mainly by the peso appreciation, which trimmed PHP 194.9 billion, as well as net repayments of PHP 4.17 billion, although stronger third currencies added PHP 20.82 billion in valuation effects,” BTr said.

Foreign debt was composed of PHP 2.25 trillion in loans and PHP 2.51 trillion in debt securities.

Debt securities consisted of PHP 2.13 trillion in US dollar bonds, PHP 214.17 billion in euro bonds, PHP 58.24 billion in Japanese yen bonds, PHP 56.18 billion in Islamic certificates and PHP 54.77 billion in peso global bonds.

As of end-September, the NG’s guaranteed obligations rose by 5.6% to PHP 364.03 billion from PHP 344.79 billion at end-July.

“The increase reflects PSALM’s (Power Sector Assets and Liabilities Management) availment of new guarantees amounting to PHP 24.33 billion and escalation in the valuation of third currency-denominated component of PHP 1.38 billion, while the favorable peso movement provided a downward offset of PHP 6.47 billion,” according to the Treasury.

The drop in debt in August can be attributed to the peso, which strengthened amid expectations of the US Federal Reserve’s easing cycle at the time, Jonathan L. Ravelas, senior adviser at professional service firm Reyes Tacandong & Co., said in a Viber message.

The Fed began its easing cycle last month as it cut rates by 50 basis points, bringing its key policy rate within 4.75-5%.

“The stronger peso exchange rate versus the US dollar, the strongest for the peso in about six months, also led to the reduced peso equivalent of the NG outstanding foreign debt,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber chat.

He added that the decline in outstanding debt was also due to the repayment of maturing government securities.

In the coming months, he said the stronger peso and more maturing Treasury bonds could drive debt levels lower.

“However, there are no large NG maturing debt in November-December, in view of the holidays in towards the end of the year, though there are also reduced borrowing activities near the holiday season, so new NG borrowings could largely be a function of the budget deficit and peso exchange rate trend,” he added.

The USD 2.5-billion dollar bond issuance in August could be added to the NG’s debt stock in September, Mr. Ricafort added.

The government’s borrowing program for this year is set at PHP 2.57 trillion, with PHP 1.92 trillion to be raised from domestic sources and PHP 646.08 billion from the foreign market.

Latest data from the Budget department showed that the NG’s debt stock is projected to reach PHP 16.06 trillion by the end of 2024. — B.M.D.Cruz